Many of you have asked me to let you know when we see a change in the market. Please allow this article to serve as your official notice: THE MARKET IS CHANGING. And the shift is happening quickly.
From last October until this March, we saw a significant downward trend in the supply of active listings for sale. That trend produced a frenzy of multiple offer situations that produced rapid price acceleration. That trend has completely changed, and over the past six weeks, active listing counts have been rising rapidly.
For years, buyers have been crying out for more supply. Their wish is finally coming true. From May 7 – 14, we saw more than 3,000 listings added to the greater Phoenix residential database for the first time since 2010. Active listings are up over 30% in a single month, which is one of the most dramatic shifts in direction we have ever seen. The overall supply of active listings for sale has increased almost by half since this time last year. There are homes to buy right now.
The effect is especially prevalent in the price ranges from $500,000 to $2 million, which corresponds almost perfectly with the Scottsdale North market. The largest change was in properties between $500,000 to $1 million. That number doubled in just six weeks. If this trend continues for several months, the market dynamics will change significantly.
This sounds like an onslaught of new listings, but this story about increases in supply is really about a drop in demand. Homes simply aren’t selling at a fast enough pace to absorb the listings being added, so supply is building.
Why? The drop in demand is due to a combination of sudden and dramatic increases in interest rates combined with the eye-watering price increase over the last year or so. The rising prices, along with the rising interest rates, are doing what they are supposed to do – dampen demand. Dampened demand means fewer homes selling. Simply put: when fewer homes sell, supply builds.
I have often said that Scottsdale North buyers are much less interest rate sensitive than other buyers. And they are! But this double whammy even has them a bit shell-shocked. And as I write this, their other equities, like the stock market, are getting trounced too.
WHAT DOES ALL THIS MEAN?
If you are a seller, your prices are not dropping, and there is still below the normal competition. If you are a Scottsdale North buyer, you have more choices and less competition. (More good news: for the first time ever, jumbo loans are cheaper than conventional!) Giving us some perspective, our friend and resident real estate statistical genius, Michael Orr, at the Cromford Report, said it well: “The market is in the early stage of shifting out of an insane seller market and into a mere frenzy seller market. Before we know it, it could be a regular old hot seller market where properties still appreciate but take multiple weeks to sell…While the market is still strongly in favor of sellers, it is changing rapidly. For those sellers waiting to sell close to the peak of price, this may be the time to list. Prices are still projected to continue rising but at a slower pace over the next few months.”
And for more perspective: as I write this article, supply is still about 70% below what we consider normal for this time of year. That is important to remember.
We are entering a much more uncertain period and caution is advisable. The days of sellers demanding buyers remove all contingencies are likely behind us for a while. Home prices aren’t coming down, but sellers’ negotiating power apparently is. Sellers should forget about breaking records or your overpriced neighbor’s listing and listen to the market and the advice of an experienced agent.
Caution is advisable; fear is not. If you have questions about buying or selling in today’s market, contact us. Our business is Scottsdale North market knowledge and what to do with it. For additional info, visit ScottGaertnerGroup.com or call 480-634-5000.